Effective distribution has always been essential to the success of any supply chain, but it is becoming even more critical as an increasing number of retailers and manufacturers move toward an omni-channel distribution model.
If you can't move products quickly, efficiently and affordably between manufacturer, warehouse, storefront, and the end user, you will undoubtedly lose business. For this reason, you are always working to ensure that every distribution channel is functioning optimally at all times. For 2015, one of the biggest distribution challenges you will face is transportation.
Contextualizing The Importance of Transportation
Although transportation is just one link in your supply chain, it is one of the most influential components when it comes to effective distribution and potential profits. Problems with transportation can derail the entire supply chain by causing inventory issues, late deliveries to customers and much more. Likewise, compensating for issues that arise in transportation can cause your company a great deal of money.
Unfortunately, many different factors can cause issues within your company's transportation system. Anticipating the issues that are most likely to become problematic and preparing for them in advance is the only way to ensure that all operations continue to run smoothly.
During the first quarter of this year, you are likely to deal with two primary issues: truck driver shortages and the freezing of the Great Lakes.
No matter where a distribution channel begins or ends, at least one truck driver will be involved. Unfortunately, according to JOC.com, we are currently facing a significant truck driver shortage, which began in 2009. Although the problem has improved somewhat since then, the number of drivers working in the industry today is still significantly lower than it was at its peak in 2007. Furthermore, as the need for transportation increases, the need for more truck drivers increases as well, thus making the shortage even more serious.
In order to attract new drivers and deal with revenue loss related to the shortage, trucking companies have been steadily increasing their rates. This rate increase raises the cost of distribution, which in turn decreases profits for companies everywhere.
Problem 2: Ice Jams on the Great Lakes
Winter 2013-2014 brought the worst ice cover the Great Lakes have seen in the past 35 years. By March, 92 percent of the lake's surface was solid ice. According to Monroe News, crews worked until May to keep shipping lanes open. However, the volume of goods shipped still decreased dramatically during this time. Monroe News reports that freight volumes dropped by 7 million tons, costing businesses approximately $705 million. With winter upon us again, businesses that utilize Great Lakes shipping lanes would be wise to plan for ice jams once again.
Planning for 2015
Now that the first quarter of 2015 is underway, companies everywhere will revisit their supply chains in order to plan for the rest of the year. As you consider your strategy for the coming months, keep the above issues in mind.
- Because trucking rates are likely to increase throughout the year, you will need to compensate for the loss by raising prices, cutting other expenses and/or looking for alternate methods of transportation whenever possible.
- Because ice coverage on the Great Lakes may become a problem during 2015, and your company should be prepared to seek other transportation routes in case of delays and/or to compensate for the cost of delays and alternate transportation methods when necessary.
Although these two issues are likely to cause serious disruptions during the first part of 2015, they will not be the only challenges your supply chain will face. When evaluating weaknesses or potential roadblocks your distribution channels, don’t just focus on the big issues. Remember to look for other, less immediately urgent issues as well and address them effectively so that every channel you depend on will continue to function properly.